2019 Proxy Season Wrap-Up: Drawdown, Discrimination, and Drug Prices

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We’re always interested in new and action-oriented ideas. One source of inspiration last year was Project Drawdown by Paul Hawken. Drawdown is a book that ranks the 100 most impactful solutions for climate change, based on their potential greenhouse gas reduction, investment cost, and related (monetary) savings. While there were many eye-opening solutions on the list, we were particularly taken by the building- and food waste-related opportunities. So struck, in fact, that these opportunities formed the basis for much of our climate change-related advocacy last year. You can read about this (as well as some of our advocacy that was inspired by Ronan Farrow’s journalism) in this 2019 proxy season wrap-up.
Climate Change
According to Project Drawdown, buildings account for 32% of electricity use and 19% of energy-related greenhouse gas emissions (GHGs) globally, but it is estimated that 80% of that energy is wasted. Appalling, right? Mitigating energy waste and increasing building efficiency represent significant opportunities to reduce global GHGs. While all of the real estate investment trusts (REITs) that Clean Yield invests in have some Energy Star- or LEED-certified buildings, we identified a few companies that had yet to report portfolio-wide energy use or greenhouse gas emissions. If what’s measured gets managed, what’s not measured is likely not being well managed. Last year, we asked Mid-America Apartment Communities (MAA) and American Campus Communities (ACC) to report their GHG emissions, to assure us that they have a handle on their energy use and related costs and so that they can set targets for GHG reductions. After a call with ACC, we learned that it is in the process of collecting the data to issue its first sustainability report. MAA was unresponsive to our letters but did respond to our shareholder proposal. After some engagement, the company publicly committed to reporting and setting greenhouse gas emissions reduction goals. The result? As investors, we will now be able to see energy use for 200 campus communities and over 300 apartment communities and hold our companies accountable for their climate impacts. The ultimate goal? Nudging these REITs to achieve net zero emissions through energy efficiency improvements, electrification, and renewable energy purchasing.
In addition to our building efficiency and sustainability reporting work, we also started work on the issue of food waste and its role in climate change. According to the World Resources Institute, if food waste were a country, it would be the third largest emitter of GHGs, behind only the U.S. and China. Project Drawdown lists reducing food waste as its third most impactful climate solution. With the recent acquisition of Whole Foods and the expansion of Amazon into fresh food delivery, we realized that Amazon has significant potential food waste. We have no idea how big this food waste potential is, because Amazon does not report on it. Along with JLens Investor Network (lead filer), we filed a proposal asking Amazon to report on its food waste footprint. We held one engagement call with Amazon, and it was clear that the gap between our request and what the company was willing to do was vast. This was disappointing. If traditional grocers can measure food waste, shouldn’t Amazon with its data savvy be able to? The proposal went to a proxy vote and was supported by over 25% of shareholders – particularly impressive given the fact that this was the first proposal of its nature to make it to a vote at Amazon.

Additional Clean Yield Engagement Issues

  1. Safer chemicals
  2. Climate finance
  3. Reproductive rights
  4. Gun violence
  5. Energy efficiency
  6. Forced arbitration
  7. Sustainable protein
  8. Paid family leave
  9. Workplace practices
  10. Climate lobbying

Equity and Inclusion
In the areas of equity and inclusion, we reached a precedent-setting agreement with McDonald’s. Fast-food workers are among the most vulnerable workers, particularly when it comes to workplace harassment and discrimination. Following the walkout of McDonald’s employees in 10 cities over the company’s handling of harassment claims, we decided to ask the company to open up about its use of mandatory arbitration and nondisclosure agreements, employment clauses known to let workplace harassment fester. In response to a proposal filed by Clean Yield and a similar proposal filed by ChangetoWin, a democratic federation of labor unions, McDonald’s agreed to disclose its limited use of these clauses and increase board oversight. This new disclosure by McDonald’s allows sunlight into the company’s handling of workplace harassment claims and puts pressure on competitors to match McDonald’s disclosure. More information about the proposal and agreement can be found here.
Healthy Democracy
This year, we continued efforts to increase the transparency of corporate money in politics. Political transparency increases accountability to shareholders and is essential to rooting out the impacts of dark money in politics. In a regulatory environment where corporations can (and do) have outsized impact on the political system, we think this type of transparency is key to protecting the health of our democracy.
In partnership with the Center for Political Accountability, we filed proposals with Loews and Silicon Valley Bank (SVB), requesting that the companies disclose their direct and indirect political contributions, as well as the policies and oversight structures governing any political involvement. The proposal with Loews went to a vote and garnered a respectable 27%.
In response to Clean Yield’s proposal, SVB made big improvements in the disclosure of its political involvement and committed to board-level oversight of political activities going forward. In recognition of this progress, Clean Yield withdrew its proposal. While there are still ways for SVB to continue evolving its practices, we believe that its recent commitments represent a meaningful step toward political transparency. More information about our agreement with SVB can be found here.
This year, we also, once again, partnered with the Unitarian Universalist Association to ask ExxonMobil to disclose its political spending. This disclosure is important because it would allow the company’s owners, its investors, to see how corporate funds are being allocated to influence climate policy – an avenue through which Exxon may have significant climate impact. We had an engagement call with the company and could not come to terms. The matter went to a vote, and our request was supported by 26% of Exxon shareholders.
Drug Pricing
In a newer area of work for us, we co-filed a proposal at Merck on drug pricing. The proposal, which was led by the Province of Saint Joseph of the Capuchin Order and co-filed by as many as 10 other investors, asked Merck’s Compensation Committee to address our concern that compensation incentives encourage executives to increase drug prices, in conflict with the company’s commitment to limit drug price increases. This proposal garnered 29% of the vote.
The Rundown
Clean Yield was successfully able to withdraw many of its proposals this year, but a handful went to a vote. Our average vote was 27% – an increase from years past. This increase is consistent with vote tallies for environmental and social proposals across the board and indicates that shareholders are increasingly supporting these requests.
In addition this year, we sent letters, signed on in support of letters, or held engagement calls on a range of topics, including safer chemicals, climate risk in banks’ loan portfolios, gun violence, energy efficiency, forced arbitration, sustainable protein, workplace practices, and climate lobbying.

CompanyIssueVote
SVB Financial GroupPolitical contributionsWithdrew (agreement reached)
LoewsPolitical contributions27.80%
Exxon (co-filed with UUA)Political contributions26.10%
Merck (co-filed with Province of Saint Joseph of the Capuchin Order)Drug pricing29.07%
McDonald’sSexual harassmentWithdrew (agreement reached)
Mid-America Apartment CommunitiesSustainability reportingWithdrew (agreement reached)
Amazon (co-filed with Jlens Investor Network)Food waste25.89%

 
Shareholder Rights
We are also focused on preserving our rights as shareholder advocates, which are currently under threat. In May, the SEC announced that it expects to propose rule amendments related to the thresholds for shareholder proposals – likely both the ownership thresholds required to file and the resubmission thresholds that require that proposals get a certain amount of support in order to be refiled. It is expected that any proposed rule will limit the ability of smaller shareholders to file proposals and could stymie the ability of new proposals to take hold. In September, the SEC also announced that it would change its handling of the No Action process in the coming proxy season – changes that could disproportionately impact small investors. For more information about the value of shareholder rights and what we, in concert with other investors, are doing, check out the Investor Rights Forum.
Looking Ahead
In the coming year, we expect to continue our focus on climate change, equity and inclusion, and building a healthy democracy.

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